Mea Culpa: Biomethanol Will Be A Major Shipping Fuel

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For the past week I’ve been working with a team of deep and broad experts in decarbonization in the Netherlands. The transmission system operator TenneT invited me and other experts to assist them with their Target scenario for 2050 to enable them to plan for transmission upgrades and space requirements in a country where land is so precious that they make their own, building entire provinces from sea beds, dykes, and massive pumps.

The TenneT core team were deep and broad in their own ways. Emiel van Druten, who led the charge on scenario planning, with a decade of modeling background in energy across Dutch economy, has a sharp-eyed view on where the football will be. Emmanuel van Ruitenbeek brought aerospace engineering, a masters in sustainability, and a decade of European energy trading to the table. Tim Gaßmann brought power engineering and a decade of energy planning to the room, along with a deep understanding of how the core scenario tool, the Energy Transition Model, and related external dashboard hang together.

A brief shoutout to the Energy Transition Model (ETM). This free, browser-based toolkit from Amsterdam’s Quintel puts you in the driver’s seat, letting you build future energy systems with a dizzying array of sliders, around 300 by the last count. Want to see what happens if your region doubles down on heat pumps or scraps coal by 2050? Just tweak the supply and demand bars and watch as charts, emissions figures, and costs update in real time. It’s transparent, open-source, and refreshingly honest, with no hidden assumptions, no techno-liturgical claptrap. Every European country is baselined in it, but seemingly no non-European countries at this time. That should change. The TenneT team and the larger national scenario modeling team have been using ETM for years, and I was deeply impressed with it and that they were so familiar with the levers to pull as we explored options.

The external expert team was diverse. Professor Heleen de Coninck is a Dutch climate scientist and professor specializing in technology, innovation, and societal change for decarbonization. She is widely respected for her authoritative role as Coordinating Lead Author for the IPCC’s landmark Special Report on Global Warming of 1.5°C. De Coninck’s research critically examines the intersection of climate policy, carbon capture, renewable energy systems, and sustainable innovation. Her insights are frequently sought by policymakers and academia for nuanced analysis of how technology choices shape climate outcomes and social equity. Currently, she is a professor at Eindhoven University of Technology, guiding research and dialogue on actionable pathways toward deep decarbonization. She held our feet to the fire on negative emissions pathways, something we actually found.

Reinier Grimbergen is a prominent Dutch expert on industrial transformation and sustainability, who served as Principal Consultant at TNO, the Netherlands’ leading applied research institute. With a PhD in solid-state chemistry from Radboud University, Grimbergen spent nearly two decades at DSM, driving innovation strategy, corporate sustainability, and R&D leadership. His current work focuses on electrification, renewable feedstocks, and circularity within Europe’s heavy industrial sectors, particularly chemicals and materials. Grimbergen is deeply involved in shaping Europe’s Green Deal initiatives and industry-wide collaboration through platforms such as VoltaChem and Brightsite. His insights into the chemical industry in the Netherlands were key to our approach.

Last but not least of the external experts was Paul Martin, a Canadian chemical engineer with over three decades of experience in hydrogen, syngas, and industrial process development, with dozens of projects developing modular chemical processing plants of all types. As founder of Spitfire Research, he combines hands‑on expertise in designing and scaling pilot‑to‑commercial plants with a keen no‑nonsense approach to decarbonization. A co‑founder of the Hydrogen Science Coalition, Martin is a trusted contrarian voice in the energy transition, questioning hydrogen “hopium” and advocating for practical, efficiency‑first solutions.

The TenneT team included numerous others who came and went from the different sessions, bringing insights or listening to the evolving solution. I was deeply impressed with the insights and strategic clarity of the organization. From the TenneT Board downward throughout the organization, the Target scenario I and the other external experts assisted with is central to their strategic planning, and the priority they have given to it is a key takeaway for other organizations.

The overall Netherlands’ process is equally admirable, although with shortcomings. Nothing is perfect, but that they have a 2050 scenario planning exercise playing out that includes all energy and power sectors, all utilities, all industrial sectors and most major corporations operating in the country is extraordinary. The final results are an excellent set of scenarios that bound the solution space.

However, the high-electrification scenario had systemic challenges which TenneT needed to overcome. The external experts were asked to provide their insights and opinions on a series of specific and broad points to identify a more likely scenario, and overcome inconsistencies that the process had inserted. A PESTEL analysis had identified multiple high, median and low options, and the process ensured that each potential extreme was represented in at least one of the four scenarios. The Target scenario needed to be cleansed of unlikely extremes, for example the persistence of 60% of fossil fuel refining in the country.

And now we start to get to the mea culpa and the good news that comes along with it. The Netherlands is the refinery for Europe, with very large crude carriers steaming into its major ports to feed its five massive refineries. While ground transportation had broad agreement in the high electrification scenario as almost entirely electrified, with a mere 10% of heavy goods vehicles running on hydrogen to eliminate, the core question of aviation and shipping energy remained.

I’ve been looking at the question of demand for years, with projections of both maritime shipping and aviation volumes through 2100 in the public domain, along with innumerable analyses of the pathways to decarbonization. My broad opinion remains unchanged, in that it will still be batteries and biofuels powering the ships and planes of the future. As always with my projections, I don’t claim to be right, just less wrong than most, and when I find out I’m wrong about something, I massage my perspective, not the facts. Case in point: this article.

Aviation will electrify far more than most think, with battery hybrid turboprops carrying 100 passengers flying 1,000 km routes, divert and reserve provided by biokerosene. Those flights will be cheaper than current flights because operations and maintenance of simple electric drive trains with many fewer moving parts powered by high-efficiency and cheap electrons will be cheaper. Long-haul flights will be more expensive, quite a bit more expensive, as airlines add sustainable aviation fuel (SAF) surcharges to ticket prices. The combination will be a reduction in long-haul flights and an increase in vacationers traveling more locally, simply because a lot more people will be able to afford 1,000 km electric flights than 4,000 km SAF-powered flights for their families.

But those long-haul flights need kerosene, and a lot of it. The cheapest way to make kerosene that doesn’t include fossil fuels is from vegetable oils that are hydrogenated, with about 36 kilograms of hydrogen as a chemical feedstock per ton of end fuel. This is starting to get to the nub of  what I got wrong.

The same vegetable oils can be processed differently to create diesel-equivalent fuels for ships, and are in large tonnages today. My assumption was that with the lower overall shipping demand, they would compete with aviation for those fuels, and would be powered by them.

The lower shipping demand is due to 40% of total tonnages being fossil fuels, a set that will decline radically with decarbonization in the coming decades, and a general economic shift to more local processing due to higher shipping costs. Only the lightest, sweetest crudes will be in tankers, and they will be steaming to electrified petrochemical refineries, not refineries set up to make diesel, kerosene and gasoline. I and the other experts agreed that burning fossil hydrocarbons makes no sense in a decarbonized future, but that the best source of the durable, non-burning products we make from fossil hydrocarbons today is fossil hydrocarbons in the future.

Another 15% of total tonnage is raw iron ore, steaming to the same ports the bulk coal carriers are berthing at. As I noted recently with my update to global iron and steel demand, China makes and uses half of all steel in the world, and half of that goes into buildings. With China’s infrastructure and building boom over, and the country shifting into maintenance and replacement mode, their steel production and demand is necessarily declining. The rest of the developing world will not create a market as large as the last few decades in the Middle Kingdom, so global production will decline.

Further, the economics of making iron are shifting radically, with different low-carbon technologies having bigger and smaller niches. The world will shift to America’s 70% plus supply from electric arc furnaces fed with scrap. The much smaller new steel requirements, in the range of 400 million tons a year, will be met by combinations of biomethane direct reduction with electrified process heat where biomethane is plentiful and ore grades are high, molten oxide electrolysis which requires only iron ore and electricity where ore grades are poorer and renewable resources are massive and without competition, and finally flash iron making where biomethane resources are high and ore grades are low.

While a couple of these have low technology readiness levels, I’m comfortable that they are more likely than green hydrogen direct reduction of iron, as I published recently., simply because hydrogen can be green, but it can’t be cheap and the same environmental and economic drivers that make it not viable as a ground transportation fuel — or indeed a fuel of any kind — make it uneconomic for new steel. The same illusions of cheap green hydrogen that powered the past decade of policy missteps and transportation failures also powered the illusion that green iron made with hydrogen would be cheap. Virtually all iron and steel manufacturers are backing away from hydrogen direct reduction, something that also requires high-grade ores, because it has become clear that the economics make absolutely zero sense.

The important part for the maritime shipping question is that the much smaller amounts of new iron will mostly be made much nearer to iron mines where there is an abundance of either biomass or renewable electricity resource with limited competition, and only the iron will be shipped. Iron is half the mass of the iron ore it comes from, and less iron will be required, so the 15% of shipping of raw iron ore will decline substantially as well.

So overall shipping tonnages, especially transoceanic, will decline. There is no world in which the minority tonnages of container shipping will grow to fill the void left by perhaps 50% of tonnage going away, especially in a world with more expensive shipping fuels. As a reminder, the best number I have is that 11% of fossil fuels are used to extract, process, refine and distribute fossil fuels, so the total amount of energy and remaining hydrocarbons for petrochemicals is smaller than most realize.

There’s another lever that’s important in this regard, electrification. I’ve been bullish on batteries for vessels for a long time, and I keep being proven right. My assertion for years has been that all inland shipping and most short sea shipping would simply electrify. I updated that in the past year or so with the expectation of hybridized transoceanic vessels, with all navigation within 200 km of land being on batteries. That too reduces fuel demand.

Shipping fuels will be more expensive, where electrons can’t be used. The cheapest available low carbon shipping fuels are the previously mentioned hydrogenated vegetable oils, termed HVO in shipping circles. They are currently 2-3 times the cost of the very low sulfur fuel oil (VLSFO) which currently is bunkered for large ships. The next cheapest is biologically sourced methanol, which has only 45% of the energy density of VLSFO, so on a cost per unit of energy are more expensive than HVO.

While having some flaws, the basic insights of the 2022 Nature paper by Kersey et al out of Berkeley Lab in the USA remain valid. Mass and weight of batteries aren’t limiting factors for shipping, the cost per kWh of energy is. While the numbers aren’t perfect, they found that at $100 / kWh, trips of 1,500 km broken even economically. At $50 / kWh, 3,000 km routes would electrify because it was cheaper.

China’s latest energy storage auction saw the $51 / kWh as the average bid for four hour LFP battery energy storage systems. That’s all components and systems in the full battery system, deployed, operated and maintained for a couple of decades. Grid batteries and ship batteries have remarkably similar requirements and constraints, so what grid batteries cost is going to be what ship batteries cost. This isn’t the end of the reductions in BESS costs. It’s going to get close to the cost of materials, but that means substitutability as well. China continues to invest in sodium ion batteries despite them not currently being cost competitive with LFP.

As with aviation and road transport, the simplicity and efficiency of battery electric drive trains will turn directly into cost reductions that shipping operators will exploit and lean into. 70% of all ferry orders today are have electric drive trains, and where they are hybrid there are usually plans to fully electrify. The largest ferries in the world, capable of carrying thousands of passengers and hundreds of cars, are now on order with fully electric drive trains. There are 700 unit container ships plying 1,000 km routes on the Yangtze, winching discharge containerized batteries off and charged containers of batteries on in ports along the route. An 850 unit container ship, fully electrified, is on order in northern Europe. Tug boats, tenders and lighters are all electrifying.

But back to molecultes. If all else were equal, and I mistakenly thought all else was equal, ship operators would buy the cheapest fuel and bunker HVO. This had the significant advantage of requiring no changes for ports, with blends in existing tanks and the same pumps and hoses being reusable with no modifications. Procurement and monitoring would be required, but those are minimal compared to alternatives like methanol, where a complete set of new bunkering infrastructure would be required and no blending would be possible.

However, there are reasonable limits to the amount of vegetable oils that can be procured to make HVO, and the same vegetable oils are the cheapest pathway to biokerosene, the winning sustainable aviation fuel. And crucially, while ships can burn almost literally anything, jets absolutely require kerosene.

Further, aviation is a much higher margin business than shipping, and fuel is only 19% of the average carrier’s operational expenses. The lack of substitutability of the molecules in kerosene for jet engines, the availability of the vegetable oil to jet fuel pathway, and the much higher cost of alternative pathways to jet fuel such as ethanol to jet means that the aviation industry will pay more for the available vegetable oil to heavy fuel than the shipping industry will be willing to pay.

The aviation industry will consistently bid up the price of vegetable oil for SAF over the price of alternatives available to the shipping industry like biomethanol. The shipping industry won’t get the cheap HVO because the aviation industry will bid it up above the cost of the more expensive to make biomethanol. Whatever biomethanol costs, aviation will pay more than that for biokerosene. Effectively, the cost of biomethanol is the low end of aviation fuel costs.

Currently biomethanol is coming in from $1,000 to $1,500 per ton, or $2,200 to $3,300 for the same energy as in a ton of HVO, a price expected to come down a bit as volumes increase, but not to fossil fuel levels. A ton of HVO meanwhile, cost an average of $1,600 per ton and a ton of VLSFO costs $500 to $650 per ton. Yes, shipping fuels are going to get a lot more expensive, four to six times as expensive, but so are aviation fuels, which see similar ratios and as noted will bid the HVO equivalent up above the biomethanol price point. The International Maritime Organization’s recent decision to put carbon pricing on fuels will ensure that they pay the price or get out of the shipping business.

Of course, hydrogen-based synthetic fuels are completely out of the running. In the best possible case scenario they are more expensive than biofuels, and so while some will undoubtedly be made in some cases to fill gaps in the market, they won’t be more than a few percent.

That merit order of competition drove a lot of discussions. Paul Martin was integral to this, shaped by his decades prototyping chemical processing plants where feedstocks had key trade offs. I’m indebted to him for this clarity, as I knew we disagreed on HVO vs biomethanol for shipping, but we hadn’t found time to discuss it at length and arrive at a conclusion, at least on my part.

I said there was good news with this. The biggest piece of good news is that the global shipping industry paid absolutely no attention to my opinion that methanol wasn’t the end fuel choice. 14% of new ship orders are dual-fuel with methanol this year. 30% are dual-fuel with LNG, which is a dead end due to methane slippage and supply chain leakage making it usually higher carbon than VLSFO. There is still confusion in the space, to which I inadvertently contributed.

The other piece of good news from my perspective is that with high biomethanol prices, plummeting battery costs, increasing energy densities, chemistries with vanishingly small chances of thermal runaway and the increasing proof points of ships running on batteries, hybridization of heavy ships will be triggered sooner rather than later. The transoceanic industry doesn’t appear to have caught on to this, but hybridization means so much cheaper energy costs that the capital costs of batteries will pay for itself rapidly.

Remember the 3,000 km breakeven at $50 per kWh? That was against VLSFO, not biomethanol. Against biomethanol, the breakeven point is a lot further. Electrons are always going to be a lot cheaper per unit of energy than biomethanol. As soon as a ship hybridizes, it’s going to burn every single electron before it burns a single drop of biomethanol.

There are still limits to battery chemistry, but my current assumption has shifted the goalposts substantially. All inland shipping will still electrify, but now I think virtually all short sea shipping will be battery powered, 98% or so. There are some weird, long coastal routes where some methanol will be required, but the end game is virtually all electrons. Everything in inland seas including the Mediterranean will be electric, barring some Suez Canal traffic.

The Canal, and every other major canal globally, becomes an opportunity for electron bunkering. Container ships transiting it are much more likely to winch containers of batteries on and off while they are necessarily stopped en route due to the nature of canals and lock systems. That’s going to maximize electrons as well, with massive wind, solar and battery farms in Egypt charging containerized batteries for the ship trade. At present they are exploring making synthetic methanol, but as noted, that’s going to be priced out of the market, and Egypt’s limited biomass doesn’t make it a good choice for making much biomethanol.

And that 200 km from coastlines I mentioned earlier as the part of ocean journeys that would be running on electrons? It’s going to turn into thousands of kilometers of journeys. My expectation is that trans Atlantic journeys will routinely be fully electric in 2100, and that a full 60% of global shipping energy demand will be battery powered.

That reduces the total energy demand from liquid fuels in my projection to 30 million tons of VLSFO equivalent, or about 60 million tons of biomethanol given the energy density difference. That’s good news for the global methanol industry, although nowhere near their dreams of tripling or quadrupling global demand.

So this is the mea culpa: I was wrong in thinking that biomethanol would not be the shipping fuel of the future. My economic analysis didn’t include merit order competition. The people I’ve spoken to who said that aviation would take the vegetable oils required for both SAF and HVO were right. And I was wrong about the degree of electrification, once again underestimating the plummeting costs of batteries and contrasting with HVO costs, not biomethanol costs.

Liquid fuel demand goes down further. Bulk shipping plummets. Container ships winch containers of charged batteries on board along with cargo. Ports are much quieter, cleaner and healthier. Global trade continues, but the climate change impacts plummet. The world becomes a better place. Those parts of my projection remain unchanged, but the molecules and molecules/electron ratio changes. I can live with that.